COVID-19 Means Bad News for Retail but Potential for D2C and Marketplace Ecommerce

This nasty little mutation has dominated global media and sparked speculation of total commercial shutdown with no surefire prediction for vaccine development on the horizon. The pressure lies with government and health officials and workers as they scramble to establish the best course of action for minimising the rapid spread of the coronavirus.

But what might ecommerce merchants be wondering right now?

Will the boredom and stress from quarantine cause more consumers to seek “retail therapy” online?

Will forced time off work contribute to a massive drop in retail and ecommerce sales?

Will COVID-19 cause another recession???

Well, we at SmartOSC prefer to look on the bright – or at least skeptically optimistic – side of things. For example, we like to think that even producers feeling the retail squeeze can certainly experience an increase in D2C sales to help their bottom line, while marketplace sellers can rely on diversity in supply and product to maintain. This is the beauty of ecommerce!

“Medium term, we believe ‘cocooning’ could actually boost ecommerce growth rates, while online marketplaces should be somewhat less impacted than online retailers or [D2C] brands due to their diversity of suppliers and/or seller base,” said Robert W. Baird analyst Colin Sebastian in a research note. “At this point, we believe negative Q1 guidance revisions are possible or even likely across our coverage as companies attempt to quantify the near-term headwinds from the COVID-19 outbreak.”

Let’s take a quick look at:

How ecommerce merchants are anticipating business to change

The (mostly negative) effects that we’ve seen so far

What positives we can take from present circumstances

Note: as this is a rapidly developing topic, much of this article is merely opinion and observation intended to create discussion rather than provoke fear or hesitation in readers.

How Ecommerce Merchants Expect COVID-19 to Affect Business in the Short-term

Digital Commerce 360 conducted a survey of 304 retail and ecommerce executives to determine their sentiments surrounding the current pandemic and how it might alter the course of business.

The findings are split, with an almost equal number feeling positively vs negatively. Surprisingly, though, is that a larger percentage believe sales will go up significantly as a direct result of the coronavirus.

These results aren’t anything to write home about, but it’s good to see that a slight majority are keeping a positive attitude. At the very least, ecommerce practitioners should be looking upon any spare time to quietly prepare for a monumental comeback when things inevitably recover.

The biggest impact will presumably be from disrupted supply chains. Ecommerce executives are becoming more creative with their sourcing and manufacturing, as demonstrated in further questioning within the same survey:

What Major Effects has COVID-19 had on Ecommerce so Far?

Everyone has surely heard of the purchasing hysteria surrounding pandemic-perceived necessities like toilet paper and canned foods. The reason we’re seeing empty shelves in grocery stores and “out of stock” on marketplaces is because production and distribution have all but come to a halt.

Right now we’re seeing the direct results in the above-mentioned and other like products, but expect to also see a ripple effect into other verticals shortly. This is especially true of merchants that depend on Asian manufacturing, where COVID-19 efforts are at a head.

“On the fulfillment and logistics side, Amazon, UPS and FedEx have all been announcing delivery delays caused by spikes in online ordering related to coronavirus concerns. Amazon said Prime Now and Amazon Fresh deliveries have both been impacted, according to Bloomberg, with the surge straining capacity.”

Government restrictions have (mostly) not affected international trade thus far, but it should also be anticipated if things continue to worsen.

From an individual consumer perspective, many are being asked to practise “social distancing”. For industries that permit remote work this isn’t such a hurdle, but for those who can’t continue to earn an income while staying at home, the effect will not be limited to retail and ecommerce alone.

Loss of income could contribute to buyer hesitation in the long term while many still reel from the shock and become more disciplined in how they spend their money.

"Let's go to the Winchester, have a nice cold pint, and wait for this all to blow over."

While the true impacts are yet to be quantified, the good and the bad are left up to speculation for the time being. It’s important to stay informed and try to look on the bright side of things.

Not intending to speak in poor taste, there are some major positives that could come – at least in ecommerce – from COVID-19:

Higher traffic volumes to ecommerce storefronts

Retail closures necessitating online purchases

More attentive audiences – marketing-wise

Increased product demand

Recruitment opportunities

The best we can do is trust that the situation will be dealt with in the best way possible through a coordinated global effort. Ecommerce merchants should at the very least use this time as an opportunity to optimise their processes and stay safe and prepared.

Did we miss anything? We’re happy to hear your thoughts on how things might play out in the coming months.